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Drama in the auto industry

There is such a thing as overthinking things. I have accused myself of it here before but clearly, I have a long way to go in overthinking if I’m to catch up with the drivetrain engineers over at Rolls-Royce.

There is a car called a Rolls-Royce Wraith, and this is how its automatic gearbox works: the Wraith uses GPS data and satellite-sourced navigation information to predict what the next gear should be. What?

Yes, what indeed. In a nutshell, this Rolls-Royce coupé basically relies on the Internet to change gear. Instead of the myriad sensors depending on real-time data to react accordingly to road conditions, the engineers thought it would be cooler for the car to

“see” the road ahead via satellite and arrange itself accordingly. It’s like a Formula One driver trying to win a championship, not by looking directly at what’s ahead of him, but by watching himself on the giant TVs in the grandstands to see if he’s about to hit

anyone or veer off the road. What kind of person would dream up such a convoluted and unnecessarily complex approach to what should be as simple and straightforward as load sensing at either engine or transmission level?

In the motoring industry, it has to be a German.

What kind of German?

One who is employed at BMW.

It is generally accepted that Germans are humorless and free of hijinks, but are they really? Just because they can transform the gearbox of a luxury car from a collection of mechanical parts to something that uses the kind of bandwidth sufficient to

communicate with alien life forms three light years away does not mean they do not sometimes show their human side. And by “human”, I mean “emotionally insane”. You see, I promised a story before and now I will deliver, not one, but two incidents of

German people being uncharacteristically non-Teutonic. Let’s start with BMW.

TRUNCATED SUMMARY

The Infamous BMW Board Meeting

Following my highly truncated summary of the British auto industry last week, we found that the opening of English borders to foreign cars led to the collapse of that industry, seeing how quality and costs refused to meet on the spreadsheets.

British car manufacturers floundered on the brink of extinction and the Germans swooped in like vultures waiting until the moment when their prey is weak enough before eating them alive.

One of these vultures was BMW and the unwitting prey was the Rover Group. BMW made themselves a name manufacturing aircraft engines during the Second World War and their clients are known to be among the most aggressive drivers on the road, so it is safe to say that belligerence and viciousness might be part of the fabric that encompasses the brand.

The Rover Group, on the other hand, was on the back foot, relying on nothing but blind faith in their client base to find sales, sales which dwindled day after day after loss-making day.

The final nail in the coffin was the release of the then-new Freelander, a car that came so badly unfinished straight out of the factory that assembly would be completed in the dealer yards as the unwitting buyer sat in the office signing paperwork acquiring

ownership of one of the auto industry’s best hidden lemons. German mastication of fresh British meat was inevitable.

Was it a wise buy, though?

No. BMW later came to regret their hostile corporate takeover of the British icon (once valued at the symbolic sum of 1 Deutschmark. One). The Rover brand was such a problem child that BMW ownership of the marque led to one of the most interesting board meetings I have read about and well near sunk the company. This is what happened:

February 5, 1999

A cold, bleak Friday morning saw the calling of a meeting of, and by, the powers that be over at the Bayerische Motoren Werke. In attendance were Susanne Klatten and Stefan Quandt, hereinafter referred to as “The Quandts”, the main shareholders at

BMW. Also in attendance were Eberhard von Kuenheim (previous main board chairman), Bernd Pischetsrieder (Von Kuenheim’s successor as main board chairman), Wolfgang Reitzle, Joachim Milberg as well as workers’ and union representatives.

The agenda?

The future of BMW.

The Quandts were concerned about the direction the company was taking. The real worry was that they would be left in the dust by (then) DaimlerChrysler’s Mercedes-Benz brand and that the two most important saloon cars in BMW’s lineup, the (then)

entry level 3 Series and the flagship 7 Series had become bland and soporific as opposed to Daimler’s increasingly attractive Mercedes cars. However, that is not what they said at the meeting.

Instead, what happened as soon as the door closed was an outright demand for Pischetsrieder’s turnaround plan for BMW in general and the troublesome Rover brand in particular. Pischetsrieder immediately launched into an ambitious and ultimately flawed six-year, DM 4 billion projection that would expand the Rover lineup modulated on two platforms through sharing across brands, kind of like what Volkswagen currently does. The workers liked his plan and were all for it. Von Kuenheim wasn’t so impressed with the time and money aspects, so he dismissed Pischetsrieder’s presentation.

Pischetsrieder had spent the previous four years — 80 per cent of the time BMW had owned Rover— pushing for a fully independent, full range Rover brand, only to have his efforts laid to waste by his own predecessor, the zero-chills Eberhard von Kuenheim. Disillusioned and probably bitter, Pischetsrieder resigned half an hour later.

There was a lunch break, after which Von Kuenheim nominated a new leader for BMW: Wolfgang Reitzle, a brilliant, multitalented engineer whose résumé also included stints in marketing, sales and Research and development.

The proposal of Reitzle was seen as a mere formality: he, like Von Kuenheim, believed that Rover needed to be trimmed to just a few key brands, a financially secure solution. But also like Pischetsrieder, he loved British brands though he did not believe in sustaining them if it meant bleeding BMW to do it, and Rover was causing a massive hemorrhage to BMW.

That was when the workers and unions reacted. By “reacted”, I mean they labelled Reitzle an “uncompromising, iron-fisted and ruthless” overlord and flatly refused to back him.

The matter was put to ballot and each of the six workers’ delegates voted against him, including Manfred Schoch, chief shop steward and senior management representative. The capital faction (banks and shareholders) all voted for him, creating a six-vote deadlock on both sides of the table. To break the tie, Von Kuenheim offered to use his vote to instate Reitzle.

THE UNEXCPECTED HAPPENED

The unexpected happened. Reitzle, in turn, refused to accept the position if the workers and unions were not going to support him, so he surrendered. In the space of just a few hours, BMW had lost its two top executives and had no board chairman. Desperate, Von Kuenheim asked Pischetsrieder to act as interim for one or two months until a new chair was established, but Pischetsrieder was too badly bruised from having part of his life’s work summarily trashed and would have none of it. With a wry smile, he walked out of the boardroom, never to return.

Chaos ensued. Potential candidates were non-existent: Volker Doppelfield, former board member in charge of finance was unavailable, and he had plans to succeed Von Kuenheim anyway. Out of options, the board then did the unthinkable: they started ringing executives from rival companies. Porsche’s Wendelin Wiedeking turned down the offer; like Doppelfield, he saw himself succeeding Ferdinand Piëch as Volkswagen’s head honcho in a few years’ time. Helmut Werner (formerly of Mercedes) and Manfred Bischoff (then of Dasa Aerospace and currently at Mercedes) also rejected BMW’s pleas for leadership.

It wasn’t until 8pm that the name of BMW’s production chief, Joachim Milberg, surfaced. He was offered the biggest promotion of his career, leading him to phone his wife and after a brief discussion in which we presume the wife asked. “What the hell are you waiting for?” he said yes.

Milberg’s ascent to power was not without qualms. The German press painted him as theory-oriented, devoid of experience (at age 55, then) and possibly indecisive. However, he had a few things in his favour: he had the support of the Quandts, the management and the workforce. He also delved right into the job: by Monday, February 8, he had summoned BMW’s inner circle to outline his plans for BMW’s future, which heavily involved the reimagining of the Rover.

The irony? His plans for Rover were exactly like the ones Reitzle had been trying to get past Pischetsrieder over the previous four years….

*Note 1: such was the distress and confusion caused by the dustup to the Quandts that they almost found themselves on the wrong end of the circling vulture analogy. Long the hunter, BMW suddenly became the hunted when Volkswagen’s chieftain, Ferdinand Piëch, smelt blood and commissioned a British merchant bank to make a purchase offer for a sizeable chunk of the Bavarian manufacturer. Had it happened, that would have caused quite a stir in the motor industry and probably changed the scene for good.

TROUBLE OVER SAUSAGE

How much trouble can a sausage bring?

Try and picture a shareholder meeting at Mercedes-Benz. What do you see? Men in suits and expensive watches. Women in suits and expensive jewellery. Old money types shuffling about casually telling each other that maybe the Maybach should have

remained a standalone brand rather than an over-the-top extension of the S Class range. Elaborate PowerPoint presentations using electronic technology that the plebs have yet to know even exists. Crisp German accents spoken in a poker-faced, mirthless

barrage. Also, a fight at the buffet table. Wait, what?

Some loaded Germans brawled over Saitenwürschtle sausages, a Swabian delicacy, to the point the police had to be called. What?

On April 6 this year, the Daimler Corporation held a shareholder meeting in Berlin, in which a buffet had been set up. During meal time, one man took a shine to the all the sausages on offer and proceeded to heap the free victuals into a box, earning him a

stinging rebuke from one woman, a fellow shareholder who had seemingly taken umbrage at the man’s avariciousness. Other sources allege that the man was wrapping the snacks to carry home with him, which sheds new light on what exactly the definitive

economic capabilities of a random Mercedes shareholder actually are. This led to what was labelled “a verbal altercation” that rapidly escalated, necessitating the use of a telephone to summon the police, who showed up to broker peace among the investors.

Manfred Bischoff, the company chairman and the exact same Manfred Bischoff you read about in the BMW debacle above, found the whole thing laughable and quipped, “Either we need more sausages, or we’ll have to get rid of the sausages entirely”.

No, Mr Bischoff. Forget about sausages. What we need is a restructuring of the naming protocols within the Mercedes-Benz brand back to original conventions. What we need is the Mercedes-Benz E300 to actually have a 3.0 litre engine as the name suggests, and not a turbocharged 2.0 litre 4-cylinder engine like a Subaru.

*Note 1: Daimler served 12,500 sausages to its 5,500 shareholders at the annual general meeting; which averages at 2.272 sausages per investor. The meeting, which was called to dish out the highest ever dividend, saw shareholders get paid €3.47 billion at €3.25 per share. That money, even for a single share, can buy one more than a pack of sausages at a dozen sausages per pack, given the current sausage market rates.

*Note 2: Saitenwürschtle sausages are also called “wieners” or “frankfurters”… close to what we call “sausage choma” around here.